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Note from Hugh

Medicare Weekly Update, December 18, 2007

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This week, I'm going to provide a follow-up to a follow-up. It involves somewhat circular regulatory analysis, but may have significant practical ramifications for hospitals.

In the October 30, 2007 issue of Medicare Weekly Update, we first reported on a CMS transmittal issued on October 19, 2007, revising certain CMS manual instructions relating to orders for diagnostic tests. CMS noted in the transmittal that "[u]nless specified, [the new instructions] are not applicable in a hospital setting."

Subsequently, a reader contacted me to ask why the new instructions would not be generally applicable to hospitals. I responded in the November 6 issue of Medicare Weekly Update where I explained that, although not clear from the transmittal, I suspected the answer may be that the transmittal is intended to provide interpretative guidance on certain diagnostic test regulations that CMS does consider applicable to hospitals. Those regulations are set forth in 42 CFR 410.32.

Section 410.32 is titled "Diagnostic x-ray tests, diagnostic laboratory tests, and other diagnostic tests: Conditions," and, at first blush, appears to be broadly applicable to diagnostic tests furnished in any setting. However, in the 1998 Medicare Physician Fee Schedule Final Rule (published in the October 21, 1997, Federal Register), CMS stated:

"[Section §410.32] generally addresses diagnostic tests covered under section 1861(s)(3) of the Act and payable by Part B carriers rather than fiscal intermediaries. Regulations other than §410.32 govern the coverage of diagnostic tests furnished to hospital patients, which are payable through fiscal intermediary payment mechanisms. Specifically, the coverage of diagnostic tests furnished to hospital outpatients is addressed in §410.28, and the coverage of diagnostic tests furnished to hospital inpatients is addressed in §409.16. Therefore, the test ordering policy adopted in the final rule of November 22, 1996, effective for procedures furnished beginning January 1, 1997, does not apply to diagnostic tests furnished in hospitals."

Upon further reflection, I have come to wonder whether the October transmittal might not, in fact, actually apply to diagnostic laboratory tests furnished in a hospital setting, notwithstanding CMS' broad statement that the transmittal was "not applicable in a hospital setting." My analysis is as follows.

The Federal Register paragraph quoted above states that 42 CFR § 410.28 addresses coverage of diagnostic tests furnished to hospital outpatients. However, subsection 410.28(f) states that "[t]he rules for clinical diagnostic laboratory tests set forth in §§410.32(a) and (d)(2) through (d)(4) of this subpart are applicable to those tests when furnished in hospitals and CAHs." So, while Section 410.28 appears to provide the coverage requirements generally applicable to diagnostic tests (such as radiology and pathology tests) furnished in a hospital setting, it appears that Section 410.32 provides the coverage requirements applicable to clinical diagnostic tests furnished in a hospital setting.

If the October transmittal is based on Section 410.32 (which Section 410.28 makes applicable to clinical diagnostic laboratory tests furnished in a hospital setting), then I am left wondering whether when CMS said the transmittal was "not applicable in a hospital setting" they really meant that it was "not applicable to diagnostic tests furnished in a hospital setting, other than clinical diagnostic laboratory tests."

This issue is important because the transmittal imposes significant restrictions on coverage of diagnostic tests. For example, the transmittal states that:

"A standing order is not sufficient to order clinical diagnostic laboratory tests payable under the Medicare Part B clinical laboratory fee schedule including orders for routine blood glucose monitoring. A testing facility that furnishes a diagnostic test ordered by the treating physician/practitioner may not change the diagnostic test or perform an additional diagnostic test without a new order."

If the above language is applicable to hospitals, depending on how one interprets this language, it could have a significant impact on standing orders and reflex orders for lab tests furnished in a hospital setting.

We are still discussing this issue internally at HCPro, including the possibility of asking CMS for clarification. If we obtain any clarification from CMS, I will report back on this issue in a future edition of Medicare Weekly Update.

Happy Holidays!

(Note: Due to the holiday, Medicare Weekly Update will not be published next week).

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